EXHIBIT 9.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the sale of assets contemplated by the purchase agreement and the related transaction documents. The unaudited pro forma balance sheet and statements of operations filed with this report are presented for illustrative purposes only. The pro forma balance sheet as of June 30, 2013 has been prepared to reflect the sale if it had taken place on such date, and is not necessarily indicative of our financial position had such sale occurred on that date. The unaudited pro forma financial statements, including notes thereto, should be read in conjunction with our historical financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and the unaudited financial statements filed in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013.
Costs and expenses attributed to the business to be transferred include direct costs primarily associated with the business, as well as corporate expenses, including accounting, legal and human resources expenses. The corporate expenses were allocated to the business based upon estimated relative time and resources dedicated to the business. Management believes the basis of the allocations is reasonable. Certain corporate non-operating transactions of ours have not been allocated to the transferred business. These items include interest income and expense.
Statement of Operations Data:
| | Six Months Ended June 30, 2013 | |
| | Historical | | Pro Forma
Adjustments(1) | | Pro Forma
As Adjusted | |
| | (In thousands, except per share data) | |
| | | | | | | |
Product revenues | | $ | 9,346 | | $ | — | | $ | 9,346 | |
Cost of product revenues | | 2,617 | | — | | 2,617 | |
| | | | | | | |
Gross profit | | 6,729 | | — | | 6,729 | |
| | | | | | | |
Revenue from collaborative research agreements and royalties | | 332 | | (332 | ) | — | |
| | | | | | | |
Operating expenses: | | | | | | | |
Research and development | | 6,309 | | (4,690 | ) | 1,619 | |
Selling, general and administrative | | 7,287 | | (2,108 | ) | 5,179 | |
| | | | | | | |
Total operating expenses | | 13,596 | | (6,798 | ) | 6,798 | |
| | | | | | | |
Loss from operations | | (6,545 | ) | 6,476 | | (69 | ) |
| | | | | | | |
Other income, net | | 54 | | — | | 54 | |
| | | | | | | |
Net loss | | $ | (6,491 | ) | $ | 6,476 | | $ | (15 | ) |
| | | | | | | |
Basic and diluted net loss per share | | $ | (0.20 | ) | | | $ | 0.00 | |
| | | | | | | |
Weighted Average Common Stock outstanding, in thousands (basic and diluted) | | 32,935 | | | | 32,935 | |
The unaudited pro forma financial information as of and for the six month period ended June 30, 2013, gives effect to the following pro forma adjustments:
(1) To give retroactive effect to the decrease in revenues from collaborative research agreements and royalties and operating expenses estimated to be attributable to our Therapeutics business, including Prochymal and related business assets.
| | Year Ended December 31, 2012 | |
| | Historical | | Pro Forma
Adjustments(1) | | Pro Forma
As Adjusted | |
| | (In thousands, except per share data) | |
| | | | | | | |
Product revenues | | $ | 7,849 | | $ | — | | $ | 7,849 | |
Cost of product revenues | | 2,551 | | — | | 2,551 | |
| | | | | | | |
Gross profit | | 5,298 | | — | | 5,298 | |
| | | | | | | |
Revenue from collaborative research agreements and royalties | | 3,955 | | (3,955 | ) | — | |
| | | | | | | |
Operating expenses: | | | | | | | |
Research and development | | 14,108 | | (9,573 | ) | 4,535 | |
Selling, general and administrative | | 6,296 | | (3,893 | ) | 2,403 | |
| | | | | | | |
Total operating expenses | | 20,404 | | (13,466 | ) | 6,938 | |
| | | | | | | |
Loss from operations | | (11,151 | ) | 9,511 | | (1,640 | ) |
| | | | | | | |
Other income, net | | 49 | | — | | 49 | |
Loss before income taxes | | (11,102 | ) | 9,511 | | (1,591 | ) |
| | | | | | | |
Income tax benefit | | 37 | | 37 | | — | |
| | | | | | | |
Net loss | | $ | (11,065 | ) | $ | 9,474 | | $ | (1,591 | ) |
| | | | | | | |
Basic and diluted net loss per share | | $ | (0.34 | ) | | | $ | (0.05 | ) |
| | | | | | | |
Weighted Average Common Stock outstanding, in thousands (basic and diluted) | | 32,859 | | | | 32,859 | |
The unaudited pro forma financial information as of and for the fiscal year ended December 31, 2012, gives effect to the following pro forma adjustments:
(1) To give retroactive effect to the decrease in revenues from collaborative research agreements and royalties and operating expenses estimated to be attributable to our Therapeutics business, including Prochymal and related business assets.
Balance Sheet Data:
| | As of June 30, 2013 | |
| | | | Pro Forma Adjustments | | | |
| | Historical | | Net Asset
to be Sold(1) | | Proceeds
of Sale(2) | | Pro Forma
As Adjusted | |
| | (In thousands) | |
| | | | | | | | | |
Assets | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash | | $ | 1,579 | | $ | — | | $ | — | | $ | 1,579 | |
Investments available for sale | | 25,626 | | — | | 33,388 | (3) | 59,014 | |
Accounts receivable, net | | 6,406 | | (286 | ) | — | | 6,120 | |
Inventory | | 1,696 | | — | | — | | 1,696 | |
Prepaid expenses and other current assets | | 356 | | (44 | ) | | | 312 | |
| | | | | | | | | |
Total current assets | | 35,663 | | (330 | ) | 33,388 | | 68,721 | |
| | | | | | | | | |
Property and equipment, net | | 2,040 | | — | | — | | 2,040 | |
Long-term investments available for sale | | — | | — | | 14,944 | (4) | 14,944 | |
Restricted cash | | 317 | | — | | — | | 317 | |
Deferred tax asset | | — | | | | 13,629 | (5) | 13,629 | |
Other assets | | — | | — | | 1,571 | (6) | 1,571 | |
| | | | | | | | | |
Total assets | | $ | 38,020 | | $ | (330 | ) | $ | 63,532 | | $ | 101,222 | |
| | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued expenses | | $ | 6,826 | | $ | (2,027 | ) | $ | (1,500 | )(3) | $ | 3,299 | |
Capital lease obligations, current portion | | 45 | | — | | — | | 45 | |
Total current liabilities | | 6,871 | | (2,027 | ) | (1,500 | ) | 3,344 | |
| | | | | | | | | |
Long-term portion of capital lease obligation | | 140 | | — | | — | | 140 | |
Other long-term liabilities | | 329 | | — | | — | | 329 | |
| | | | | | | | | |
Total liabilities | | 7,340 | | (2,027 | ) | (1,500 | ) | 3,813 | |
| | | | | | | | | |
Stockholders’ equity | | 30,680 | | (1,697 | ) | 65,032 | | 97,409 | |
| | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 38,020 | | $ | (330 | ) | $ | 63,532 | | $ | 101,222 | |
The unaudited pro forma financial information as of June 30, 2013, gives effect to the following pro forma adjustments:
(1) Represents assets to be sold to and liabilities to be assumed by Mesoblast International Sarl related to our ceMSC business.
(2) The purchase agreement provides us with opportunities to receive milestone payments in the maximum aggregate amount of $50.0 million, related to clinical and regulatory goals. Such milestone payments have not been reflected in the pro forma balance sheet data, since their receipt cannot be assured until earned.
(3) Estimated Fair Value of the $35.0 million closing cash payments, less $1.5 million that was received in May 2013 when the original Letter of Intent was entered into.
(4) Estimated Fair Value of the payment to be made upon asset transfer. This payment can be made in either cash or Mesoblast stock. Any stock received for this payment would be restricted from resale for twelve months.
(5) Release of a portion of the valuation allowance on deferred tax assets related to the gains to be reported for income tax purposes over the next two years.
(6) Represents the estimated fair value of the derivative issued by Mesoblast, providing down-side protection on the value of stock expected to be issued in satisfaction of the asset transfer payment. The estimate will be refined through a formal valuation and is subject to change.
